BoJ Minutes Hint at Faster Rate Hikes and Yen Volatility

The Bank of Japan (BoJ) minutes highlighted inflation nearing its target as markets weigh faster rate hikes and yen volatility. BoJ board members stated that financial conditions remain accommodative, but consumer prices are rising due to higher import costs and firms passing through raw material increases, keeping wholesale inflation elevated.

They noted rising medium- and long-term inflation expectations among households and companies, with several expecting consumer goods price rises to broaden from summer. Many judged underlying inflation was nearing 2%, shifting the discussion towards stabilising price growth around that level rather than pushing it higher.

Regarding policy normalisation, one member stated it takes 1-1.5 years for a rate hike to cool inflation and growth. Another argued monetary support should be tapered gradually to avoid delaying increases, while a separate view called for nimble decisions given the policy rate remained below an estimated neutral range.

Markets were described as pricing a move about once every six months, though one member said hikes could come sooner; several also said the future pace and timing were hard to predict. Some warned term premia could rise if markets doubt the BoJ will tighten sufficiently.